StemCell Therapy

Healthcares been in the news a lot lately thanks to the Republicans efforts at healthcare reform. There are several bottoming heathcare and biotech stocks that could benefit from these efforts. One of those companies with potential is Myriad Genetics (MYGN). Myriad creates genetic tests to screen for genetic cancer risk and other diseases. Its currently coming out of a bottom and has the potential to continue moving up if it can capitalize on this growing market.

Myriad manufactures molecular diagnostic tests to screen for genetic dispositions to cancer, autoimmune diseases, and other maladies. The company is probably best known for its BRACAnalysis test. This test determines womens risk for breast cancer by detecting mutations in the BRCA1 or BRCA2 genes. Genetic mutations greatly increase the risk of developing cancer. So these type of diagnostic tests are growing more and more important for detecting cancer risks early. Advanced diagnostics also allow doctors to tailor their preventative medicine programs to better serve the patients individual needs. In fact, personalized medicine is expected to be the wave of the future. Theres also an increasing need for better diagnostic tools as the population ages. So Myriads products can fill an important niche in a growing market.

Myriads stock was in some trouble until recently. A monthly stock chart shows that MYGN was in a bear market for pretty much all of 2016. It finally started to bottom late in 2016, and completed its bottom in May of 2017. Its currently moving up strongly out of its bottom, but has retraced a bit over the past month. MYGNs all time high is at about $47, so this stock some room to move up.

Figure 1: Monthly chart of MYGN. Chart provided by FreeStockCharts.com.

A weekly chart confirms that MYGN completed its bottom last May. The chart shows very large and strong white candles coming out of the bottom, lacking indecisive wicks and tails. Small black candles form for about a month after each strong move up, likely due to profit taking. The stock is also currently undergoing some profit taking after the last strong move up in June. There have been green volume surges on the moves up, with green volume bars outnumbering the red bars since coming out of the bottom.

Figure 2: Weekly chart of MYGN. Chart provided by FreeStockCharts.com.

We can see the current retracement in more detail in the daily chart. Black candles have been larger and more numerous over the past month. We can see the strength of the green volume in May and June. But volume has been low in July, with red volume becoming more and more dominant. The chart also shows that high frequency traders (HFT) tried to sell down this stock on 7/21, possibly in response to a news release that day. It looks like the HFTs moved in at the start of the day, but failed to move the stock down much.

Figure 3: Daily chart of MYGN. Chart provided by FreeStockCharts.com

The chart indicators also confirm this weakness in the current price action. RSI is moving down steadily to the bottom of the chart. Stochastics has also moved down well into oversold territory. Both indicators look a little overextended but dont show any signs of a reversal quite yet.

Figure 4: Indicator charts for MYGN. Chart provided by FreeStockCharts.com

MYGN really looks a little week right now. There arent enough buyers to stop the slip-slide due to profit taking. The pattern of this stock, however, has been to move up strongly and then slowly slide back for a month. So well see if the stock continues that trend in August.

The charts show that MYGN has recovered nicely in 2017. So lets check the fundamentals and see if they justify the stocks uptrend. Myriads income statement shows that revenues started to turn around in the first quarter of fiscal year 2017. Revenues, however, were flat last quarter. Net income, on the other hand, has been inconsistent. Income has been up and down for the past several quarters. Costs have also continued to rise, but flattened out last quarter.

Figure 5: Income statement for MYGN. Data provided by Google Finance.

Myriad also took on a lot of debt in the second quarter of fiscal year 2017. The company started to pay down that debt last quarter, so at least its controlling its debt load. The current ratio is about 1.6, which is acceptable.

Figure 6: Balance sheet for MYGN. Data provided by Google Finance

Data from Nasdaq.com shows that the institutional holdings are above 100%. This usually means that some convertible bonds were executed, or that there was a direct stock sale to an institution. This should pattern out in the next quarter after Nasdaq.com updates its information. MYGN has 261 holders, so its pretty widely held for a small cap. And more funds started new positions or increased their positions compared to funds that sold out or decreased their holdings.

Figure 7: Institutional Holdings for MYGN. Data provided by Nasdaq.com.

A few giant funds are among the top holders of this stock, including Vanguard and Dimensional Fund Advisors. There are few giant banks in the mix as well, such as Blackrock and State Street. Some large banks have reduced their holdings in this stock though, which is interesting. The buy side institutions are doing the opposite; theyre increasing their positions or holding steady.

Figure 8: Top holders for MYGN. Data provided by Nasdaq.com.

Myriads financial performance improved last year but slowed down last quarter. Can it pick up again? A quick look at the last earnings report can show us what to expect. Myriad expects accelerating growth going forward, per CEO Mark Capone. Capone said, Coupled with meaningful sequential volume growth in all of our major pipeline tests including GeneSight, Vectra DA, Prolaris, and EndoPredict, we believe we are rapidly approaching an important inflection in our business where our new products will drive accelerated revenue growth and profitability.

That sounds promising, but we need more specifics. Luckily, the report also provides guidance for the fourth quarter of fiscal year 2017. The company expects revenues of $192-$194 million, which is flat to slightly down compared to last quarter. Earnings per share are expected in the range of $0.11 to $0.13, which is a large improvement over the $0.06 per share reported last quarter. Revenues for the full fiscal year are expected to be $763-$765, up just 1% over 2016. Earnings per share are expected to drop from 2016, down to $0.23-$0.25. This reflects the slowdown in earnings that was observed in the first three quarters of fiscal year 2017. The company needs to show that it can continue to grow revenues and earnings more consistently. Itll be interesting to see what the guidance is for 2018 in the next earnings release. Myriad is expected to report around August 8th.

MYGN has trended up fairly strongly out of its 2016 bottom. Its also in a market with a lot of potential, notwithstanding the healthcare shenanigans going on in Congress right now. The companys financials showed improvement earlier in the year, but have started to lag more recently. It needs to continue to grow revenues and earnings, otherwise the current profit taking could turn into broader selling. The 2016 high of $40 could also challenge the uptrend if the financials dont continue to improve. The stock shows some promise, but theres also some uncertainty about companys performance in the next fiscal year. The fact that large funds are interested in this stock bodes well for it though. And an earnings report that beats expectations could cause the stock to move up strongly again. Investors that are interested this companys technology should wait until the profit taking ends before entering this stock though. The $27 level looks like a good place to enter. For everyone else, its best to wait until the next earnings report to see the companys projections for fiscal year 2018.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

See original here:
Myriad Genetics' Stock Is Starting To Make A Run - Seeking Alpha

This entry was posted on August 1, 2017 at 7:50 pm and is filed under Genetics. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed. |